What is Probate?
Everybody thinks probate is a big bad
monster that gobbles up families. Well, it isn't really that
bad, but it has been known to be a real nightmare for some
families. The word probate, in Old English, simply means
"to prove". In American law, probate now describes
matters over which a probate court has jurisdiction. This
includes traditional proof of Wills, the disposition of estates,
the appointment of guardians and conservators, and other
An American family will usually be exposed
to the probate court when: 1) a family member dies, 2) a
family member becomes incompetent, or 3) a minor child inherits
In short, the probate system is meant
to protect family members and creditors to assure that everyone
gets his fair share of the property left behind. The probate
court sees to it that the bills are paid, the property is
"legally" transferred to its proper new owner,
that the children are placed in new homes, and the children's
financial affairs are safeguarded. All this is good, but
85% of it is unnecessary when you do your planning ahead
of time and use a Revocable Living Trust. In the Accumulation
and Preservation of Wealth System, you will have the
tools necessary to let you decide who raises
your minor children and how your property is divided.
Difference Between Probate and Estate Taxes
Some people confuse probate and estate
taxes. They may have even been told by their attorney that
their estate was too small to worry about. What the attorney
was probably referring to was the estate was too small to
have to worry about paying estate taxes.
It's true that (as of 2006), estates with a value less than
$1.5 Million will not pay any federal estate taxes. The IRS
calls this the exemption equivalent.
But probate has nothing to do with property
value and taxes, and it has everything to do with ownership
of property. Its primary purpose is to transfer the property
from the deceased person to the rightful owner. This includes
all property that must have the deceased person's signature
or rightful permission to transfer ownership. Think of things
such as real estate, stocks, automobiles, and bank accounts.
If the person owning such property is deceased, then there
must be a court order issued (using the probate process)
before the property can be transferred to the rightful heirs.
But I Have A Will. Will My Estate Be Probated?
A Will alone cannot prevent an estate
from going through the probate process. In fact, a Will doesn't
have any "legal teeth" until it has gone through
the probate process. The probate court must validate the
Will and empower the personal representative with authority
to deal with the banks, stock broker, real estate agents,
and everyone else that has an interest in the estate. The
probate process itself is the same whether there is a Will
or not, but if you don't have a Will, the court acts on the
state's instructions instead of yours.
Can Joint Ownership Prevent Probate?
Yes, it can. But it also opens up a host
of other tax and legal problems. Find out more in our
Joint Tenancy section.
The Impact of Probate
While some attorneys may feel that probate
is no big deal, there are many substantial 'impacts' that
probate may have:
Probate Makes It Easy for Professionals to Rob You
Confused clients are usually
at their attorney's mercy when it comes to the probate process.
Although the proceedings are usually legally fairly simple,
an attorney can rack up bills totaling thousands of dollars.
And that is just for the simpler cases. When there are real
questions on creditors, legal liability, or rightful heirs,
probate can consume a large part of the estate. In general,
probate usually takes between 1 year and 2 years, and costs
thousands of dollars or more depending on the size of the
education, bulletproof plain-English estate planning documents,
and legal support, you can skip
the professional legal expenses, or at least learn
to control them.
Probate Hampers Asset Management
When assets are caught in the
probate process, the can be a real financial loss. When the
personal representative is unable to sell items such as stocks
on their way down, or real-estate that is depreciating, it
may force them to cash out other assets in order to continue
paying for the probate process. Being forced to liquidate
estate assets almost always costs the estate. For example,
certificates of deposit may have to be cashed early, which
will result in a penalty and loss of money.
Probate Takes A Lot of Time
Probate can eat up a bunch of
time that might better be spent on your family, business,
or on vacations. It can be very frustrating. The courts really
don't care how long the probate runs -- they are only interested
in making sure everyone's rights are protected and the proceeding
is fair. The lawyers aren't in a hurry either, especially
if they are billing hourly. It is hard to give an average
length of time for a probate to finish. Many cases have tied
things up for well over ten years. A safe bet would be to
say that an average probate is around 1.5 years.
Emotions Run High Within Families
An intangible cost of probate
can be damaged family relations. At first the family may
be in shock and everybody tends to pull together. But as
the long probate process continues, family stress can take
its toll. As time ticks away, somebody will go into the house
and take something. Then as family members talk to friends,
the friends plant ideas of bad things that happened during
so-and-so's probate process. The "family love" eventually
can give way to an all out legal or even physical brawl.
In order to avoid probate,
you must make it so the owner of the property doesn't die.
The best way of doing this is with a
Revocable Living Trust.
When used correctly, you will
totally bypass the probate process altogether. You see, when
you die, the trust (which will own your property) remains
quite alive, and is able to simply designate your choice
of a successor to carry out your wishes exactly as you spelled
them out. There is no waiting for the long expensive probate
process to 'figure out' who the new owner should be. The
owner didn't change; just the manager or 'trustee'.
The Resources That You'll Need
DVD on Understanding Probate
here for a Free DVD
This DVD is your guide to understanding estate
planning, including understanding probate.
For those interested in finding out more about avoiding probate,
we offer the 300+ page book Protecting
Your Financial Future. This book will give you an understanding
of the probate process and things to look for when setting
up your estate plan in order to avoid probate.
For those wishing to take a hands-on approach to setting
up your own Revocable Living Trust and other powerful estate
planning tools. the Accumulation
and Preservation of Wealth System provides the necessary
instruction and document templates to set up your estate
plan and totally avoid probate, or (if you choose) have only
certain portions of your property probated.